Hardly a day goes by without an ‘NHS in crisis’ story appearing in the media. An ageing population and an epidemic of lifestyle-related diseases has stretched our publicly-funded healthcare system close to breaking point.
Figures released in October 2015 show that almost four out of five (79%) NHS Trusts are in the red. Responding to the news, Nigel Edwards, chief executive of independent health charity Nuffield Trust, pointed to a systemic problem across the health service and claimed that deficit has become the “new normal” within the NHS.
With no quick fix for this overspend in sight, radical changes may be necessary that will have a direct impact on employers. Here, we explore some potential future scenarios.
Scenario 1: The European Blend
According to OECD Health Statistics from 2013, in the UK 83% of healthcare funding comes from general government. This is more than double the 35% mean average calculated across 34 other OECD countries.
By contrast, in the Netherlands, Belgium and Germany general government expenditure comprises 7% to 10% of the total budget, while in France the proportion is lower still. The lion’s share is paid for through a combination of social security, private out-of-pocket spending and private medical insurance.
Considering the deficits most NHS Trusts are running, the ability of general government to continue shouldering such a high proportion of the costs in years to come is open to question.
“A blended model of government-funded universal healthcare for critical conditions supplemented by affordable health insurance is a viable alternative that should be considered in the UK’s funding solutions,” says Benenden Group people director Inji Duducu. “So many people hear ‘health insurance’ and think of the US approach, but the blended approach is the model used in many European countries.”
Very few nations have a fully government-funded solution as in the UK. Critically, a lot of providers of health insurance across Europe have a mutual structure – as not-for-profit organisations they are essentially taking the same pooling of costs across a population that the NHS does, albeit on a smaller scale. With no shareholders and no profit motive, the interests of these organisations are directly aligned to their members.
As a mutual, Benenden offers its membership of nearly 900,000 prompt access to diagnosis and treatment as a back-up to the NHS for a flat rate of £8.45 a month. Duducu believes this sort of price point would be acceptable to many in guaranteeing timely diagnosis and treatment, while the government still covers the “big nasties” and provides A&E services.
Under this model the employer might have no significant role to play: everyone just chooses their provider and level of cover. More realistically though, workplace schemes where employees could benefit from group rates and buying power may make sense.
“If you look at the costs of providing an employer-paid scheme at around £10 per month versus the cost of absence and decreased productivity in most places, even under the current NHS model it makes sense to have some low cost provision in place,” says Duducu.
“Whatever the solution, we need to have the debate. We need to say the unsayable: that the NHS in itscurrent format, against a backdrop of ever increasing demands and costs, is unsustainable.”
The likelihood of this scenario: Impossible to rule out. In order to preserve the essential core of NHS services a higher proportion of funding will have to come from sources other than general government.
What employers should bear in mind: Make preparations to shop around for suitable cover and use your buying power to secure favourable group rates.
Scenario 2: Auto-enrolment for sick pay
Auto-enrolment in workplace pensions has gone more smoothly than many expected. The staged roll-out is not yet complete, but with more than five million workers already enrolled since launch in 2012, both the Pensions Regulator and the government have hailed it a success.
On completion of staging in 2018, the expectation is that almost 10 million people will be newly saving – or saving more – for their retirement. Many will be using the National Employment Savings Trust (NEST), which is free for employers to use, has low charges for members, and was specifically set up for auto-enrolment.
Shifting more of the burden for pension provision onto employers has gone so well that it has encouraged some policymakers to consider how an auto-enrolment process might be applied to other areas. In light of the spiralling cost of healthcare provision, health insurance is an obvious possibility.
“The government has delegated the organisation of saving for old age to employers,” says John Ritchie, CEO of digital group risk insurer Ellipse. “Small business owners did not organise marches in Whitehall and throw stones at Parliament to protest. This has become the new normal very quickly. So it’s not unlikely that employers could become the mechanism by which we host long-term sick pay insurance.”
If this did come into being, it could take the form of employers being obliged to provide some form of sickness or catastrophe cover for all eligible staff. It may be that tax relief would be available on premiums paid by employers. Meanwhile, employees seeking cover beyond a statutory minimum (assuming they did not already receive a benefit from their employer that was more generous than the baseline level) could source that through their workplace in a way that was tax efficient.
“You might need an insurer of the last resort for people who aren’t in jobs. But what’s the big deal about that?” says Ritchie. “Having a state-sponsored insurer of the last resort that gets private risk capital in is entirely doable.”
The likelihood of this scenario: Once the roll-out of workplace pensions completes in 2018, certain policymakers will be itching to extend auto-enrolment to healthcare.
What employers should bear in mind: Absence management and risk assessment will need to be more tightly integrated.
Scenario 3: Emergence of tiered healthcare plans
The hike in Insurance Premium Tax (IPT) from 6% to 9.5% is a clear demonstration that the government is not looking to incentivise employers to provide medical insurance. But despite these escalating insurance costs, demand for cover will rise as a reaction both to the direction taken by the NHS and the need to keep the workforce both healthy and productive.
If in response to budgetary pressures the NHS focuses on applying its limited resources to certain areas, then clearly demand for private provision in the areas beyond its focus will rise. Demand will come from employers if those unprioritised health issues impact attendance at work and insurers will develop and tailor products to meet this need. But to stop costs spiralling out of control, employers are likely to in this instance want to buy markedly different levels of cover for different grades of employee.
“I can see the emergence of tiered healthcare plans,” says Iain Laws, managing director of UK healthcare and group risk at Jelf Employee Benefits. “I think those tiers will be both vertical and horizontal.”
For instance, with a job role at the lower end of the spectrum employers may choose to provide healthcare that is only directly relevant to prevention of absence in the workplace. This might be occupational health and workplace health assessment, perhaps with support for any treatment the NHS can’t provide quickly. Whereas at the top of the tree executives or senior managers may be covered by what Laws calls a “preventative, proactive, wellbeing-based healthcare programme” that would provide for any private treatment required, regardless of provision on the NHS.
We have already seen the emergence of ‘add ons’ that complement the NHS. For instance, second opinion services such as Best Doctors, which can give employees with health problems the expert detail, advice and support not always available from a time-starved GP.
“New entrants are very likely to emerge in this market as demand grows,” says Dominic Howard, European director at Best Doctors. “Imagine a worker who has been diagnosed with heart problems and is waiting for an operation on the NHS. They might turn to the internet for more information. Their ill-informed anxiety could then impact on their performance and even lead to time off – all affecting the employer’s bottom line.”
It may become increasingly common for services like Best Doctors to be incorporated into income protection, critical illness or corporate cash plans. If the expert second opinion agrees with the first, employees can have peace of mind. But there may also be cases where the expert recommends an alternative treatment, establishes that there’s been an error in the diagnosis, or decides an invasive procedure isn’t necessary.
The likelihood of this scenario: Very likely. This is an acceleration of an existing trend.
What employers should bear in mind: Look for insurers able to provide valuable ‘add ons’ as part of the package – at a competitive cost.
Scenario 4: Identifying risk through data
“We see a massive opportunity in the future around analytics,” says Matthew Lawrence, head of health and risk proposition at Aon Employee Benefits. “At the moment employers generally sit on lots of rich data sets, whether that be through absence figures, occupational health information or medical claims data. And most of them don’t really do anything with that data.”
But by using data-driven insight to take proactive steps employers may be able to reduce healthcare-related risks and costs. For instance, if a company’s data shows a health risk prevalent among its female workers aged 40 to 50 it could develop a wellbeing strategy targeted at its current female demographic in the 30 to 40 age bracket, with the intention of minimising future health risk.
A study from employee health risk specialist PMI Health Group published in July 2015 found that 8% of UK companies have already encountered employees with dementia and that 90% of UK HR professionals believe dementia should represent a concern for business. There are currently 850,000 people with dementia in the UK, but the Alzheimer’s Society expects the number to reach one million by 2021.
While data cannot provide all the answers, passing up the opportunity to develop healthcare strategies on the back of reliable, highly-specific information is unwise.
The likelihood of this scenario: Ignore data at your peril.
What employers should bear in mind: Eldercare is a huge issue for many employees. Going forward more employers may want to incorporate access to helplines and specialists able to advise on the healthcare needs of elderly relatives in their benefits packages.
